Subsidies for energy efficiency dry up

View full sizeDAN GLEITER, The Patriot-NewsAlicia Gaul, left, staff member at The Energy Store, and Skip Poust, a residential solar expert with Secco Home Services, look at the commercial and residential solar panels at the store, 310 S. 19th St., Lemoyne. The business offers energy saving products in-store and online, installation services and training.

Hardly a year ago, contractors who specialize in green energy were joyful even while the construction industry as a whole was reeling from the effects of the recession.

“There has never been a better time to go green,” said one contractor at the Pennsylvania Home Show in March.

A slew of state and federal incentives made building homes or making old ones more energy-efficient surprisingly cost-effective. Even someone spending $80,000 on a solar photovoltaic array to electrify his home could expect to get $74,000 back within five years through federal tax credits, Pennsylvania Sunshine Grants, green power credits sold to utilities, and savings. Without incentives, it could take 40 years to break even at current electric rates.

Now many of those incentives are expiring or running out of money.

American Recovery and Reinvestment Act of 2009 money will no longer be flooding into the state. State and federal governments are facing huge deficits and looking for items to cut.

The Pennsylvania Sunshine Grant fund is almost out of money. Federal tax credits for many energy-efficiency projects expire Dec. 31. Tax credits for wind power run out in 2012, although solar energy credits will continue through 2016.

The political winds have changed.

Will market forces be able to sustain the industry with less government help?

Barry Kindt, who opened The Energy Store in Lemoyne on Saturday, hopes so, but he wishes some of those incentives would stick around, too.

Kindt is president of Secco, an HVAC, plumbing and electrical contractor that also installs solar panels. He said he got into solar in 1984, during a round of green-energy incentives. When those tax credits died, “the whole industry dried up,” he said. He said he thinks this time will be different.

“The Pennsylvania Sunshine Grant breathed wind into the sails of solar,” he said. “But we saw some positive movement before the sunshine grants. It looks like it will have legs.”

Mark Whitmoyer, owner of Conservation Concepts, is a partner in The Energy Store and installs energy-saving retractable awnings and insulating window shades. He’s been in business since the 1980s and remembers what happened when government incentives went away. He also thinks it will be different this time.

“I think it’s going to stick around,” he said. “These changes pay for themselves in the long run, and they’re good for the environment. It’s still a slow process of change, but it’s faster than it has been in a long time.”

State officials also are keeping a close eye on green energy, which provides an estimated 183,000 jobs in the state, according to Pennsylvania Department of Labor and Industry statistics.

State Department of Environmental Protection Secretary John Hanger said the Pennsylvania Sunshine Grants have been a huge success, helping fund some 6,000 solar projects. Money put into research and development has decreased the cost of alternative energies, he said. Three years ago, producing energy through photovoltaic cells cost $9 a watt. Now it’s $4.50 a watt for commercial applications and $5.90 for residential.

When the state first offered Sunshine Grants for photovoltaic projects, it reimbursed them at $2.25 a watt. Now it offers only 50 cents a watt but still generates interest.

When asked if he thinks government should keep subsidizing alternative energy, Hanger said, “There is no energy industry in the United States that doesn’t get government help.”

Some of the biggest drillers pay no taxes, he said. The nuclear industry is heavily subsidized.

Hanger said he thinks alternative energy is here to stay, but he worries whether it will be the United States that provides it. Alternatives are now a worldwide industry, he said.

“China has poured billions into solar and wind. They want to dominate the industry,” he said. “Unless the U.S. responds with an energy plan, many jobs will be going to China. ... Even if the U.S. government turns its back, it will be a huge business around the world.”

Pennsylvania requires state utility companies to provide 18 percent of their electricity through alternative energy by 2021, including .5 percent from photovoltaic systems, but that’s a lesser requirement than some of our neighbors, Hanger said.

Hanger said he thinks market forces could help drive alternative energy as the cost of producing it continues to decline and the costs of fuel rise as the economy recovers. But the industry also needs help, he said.

“President [Barack] Obama and Gov. [Ed] Rendell have been champions of green energy,” he said. “We need leaders committed to these industries. The states and governors committed to pursuing these jobs will get them. ... It’s an open question of whether Pennsylvania will be a leader or not. It now depends on [Gov.-elect] Tom Corbett.”

Seth Blumsack, an associate professor of energy policy and economics at Penn State University, said the new governor will have a lot of budget pressures when he takes over and might find it difficult to put money into alternative energies.

“When state and federal governments face shortfalls, these are easy targets,” Blumsack said.

He said he thinks the economics of green energy are not great right now. Because of the recession, electric rates did not rise as some expected when the rate caps came off, giving less incentive to look at alternatives, he said.

At the federal level, “there is not a lot of enthusiasm” for cap-and-trade regulations that would put a price on carbon emissions, Blumsack said. Solar energy is still expensive without incentives. It’s hard to persuade people to invest in energy efficiencies when the payoff is several years away, he said.

Employers, apparently, see a bright future for green energy, however. The state Department of Labor and Industry recently surveyed more than 20,000 employers about the future of the industry. On average, employers said they expect green jobs to grow by 13 percent in the next two years, said Sue Mukherjee, director of the department’s Center for Workforce Information and Analysis.

Most of those jobs are in construction and manufacturing, and smaller businesses are more likely to plan to hire employees for green jobs, Mukherjee said.

She said state and federal policies can act as a catalyst for creating those jobs. Market economics rarely work on their own but are intertwined with state and federal policies, she said.

According to the survey, employers want to go green, partly because it often makes economic sense in the long run but also because of an apparent attitude change about doing right by the environment, Mukherjee said.

Bob Garraty, deputy secretary for work-force development, said employers in focus groups have told him they want the government incentives to continue.

“Can government really push the formation of a market? The answer is not there yet,” Garraty said. “If an employer can see a benefit, they will go green.”

Warren Hardman of Camp Hill, who was looking over items at The Energy Store last week, has installed passive solar heating and photovoltaic systems on his home and has reduced his energy costs to zero. But he describes himself as “a diehard libertarian” who believes the government should stay away. The price of oil and gas will have a larger influence than government policy, he said.

It’s “a dollars and cents issue,” he said. That’s why he has made his home energy-efficient.

“For every $1 I spend on something like this, that’s $1 I don’t need to spend when I retire,” he said.

A sampling of government incentives for green energy:

— Federal tax credits of 30 percent for insulation, energy-efficient windows and doors, etc., up to $1,500. The Homestar program, also called “Cash for Caulkers,” expires Dec. 31.

— Federal tax credits of 30 percent of the cost for wind power expire at the end of 2012.
— Federal tax credits for 30 percent of the cost for solar energy expire at the end of 2016.
— The Pennsylvania Sunshine Grant for solar hot water systems pays 25 percent to 35 percent of the cost. The program is almost out of money.
— The Pennsylvania Sunshine Grant for solar photovoltaic systems at first paid $2.25 per watt and now pays 50 cents per watt for commercial and $1.25 for residential. It’s almost out of money.
— The new Keystone HELP Energy Efficiency Loan Program offers low-interest loans for home geothermal systems.

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